The 28th GST Council Meeting was held in New Delhi on Saturday, July 21, 2018. It was chaired by Shri Piyush Goyal, Union Minister, for railways, coal, finance and corporate affairs.
The GST Council made recommendations in respect of slashing GST rates on specified goods and services and simplifying the GST return filing system. This was undertaken to further facilitate ease of doing business and provide relaxation to taxpayers.
Furthermore, it suggested certain amendments in CGST/IGST/UTGST/GST acts and gave consent to opening a migration window for taxpayers who were unable to complete the migration process.
This article deals with the major decisions taken by the GST Council in its 25th GST Council meeting along with their implications.
I. Reduction in GST Rates of Goods
|Type of Goods||Changes in GST Rates|
|Paints and Varnishes (including enamels and lacquers)||Reduced from 28% to 18%|
|Glaziers’ putty, grafting putty, resin cements||Reduced from 28% to 18%|
|Refrigerators, freezers and other refrigerating or freezing equipment. This includes water cooler, milk coolers, refrigerating equipment for leather industry, ice cream freezer etc||Reduced from 28% to 18%|
|Washing Machines Lithium – ion Batteries||Reduced from 28% to 18%|
|Vacuum Cleaners||Reduced from 28% to 18%|
|Domestic electrical appliances which include food grinders and mixers, food or vegetable juice extractor, shaver, hair clippers etc||Reduced from 28% to 18%|
|Storage water heaters, immersion heaters, hair dryers, hand dryers, electric smoothing irons etc||Reduced from 28% to 18%|
|Televisions with a size up to 68 cm||Reduced from 28% to 18%|
|Special purpose motor vehicles such as crane lorries, fire fighting vehicle, concrete mixer lorries, spraying lorries||Reduced from 28% to 18%|
|Work trucks – these include the ones that are self propelled and not fitted with lighting or handling equipment. Further, these are the type used in factories, warehouses, dock areas or airports for short transport of goods||Reduced from 28% to 18%|
|Trailers and semi – trailers||Reduced from 28% to 18%|
|Miscellaneous articles like scent sprays and similar toilet sprays, powder puffs and pads for the application of cosmetics or toilet preparations||Reduced from 28% to 18%|
|Fuel Cell Vehicle (compensation cess would be exempted on such a vehicle)||Reduced from 28% to 12%|
|Stone, marble and wood deities||Reduced from 18%/12%/5% to Nil|
|Rakhi (other than that of precious or semi – precious material of chapter 71)||Reduced from 18%/12%/5% to Nil|
|Sanitary Napkins||Reduced from 18%/12%/5% to Nil|
|Coir pith compost||Reduced from 18%/12%/5% to Nil|
|Sal leaves, siali leaves and their products and Sabai Rope||Reduced from 18%/12%/5% to Nil|
|Phool Bhari Jhadoo (raw material for jhadoo)||Reduced from 18%/12%/5% to Nil|
|Khali Dona||Reduced from 18%/12%/5% to Nil|
|Circulation and commemorative coins sold by Security Printing and Minting Corporation of India Ltd (SPMCIL) to Ministry of Finance||Reduced from 18%/12%/5% to Nil|
|Chenille and other fabrics covered under heading 5801||Reduced from 12% to 5%|
|Handloom Dari||Reduced from 12% to 5%|
|Phosphoric acid (fertilizer grade only)||Reduced from 12% to 5%|
|Knitted cap/ topi having a retail sale value of not exceeding Rs. 1000||Reduced from 12% to 5%|
|Bamboo Flooring||Reduced from 18% to 12%|
|Brass Kerosene Pressure Stove||Reduced from 18% to 12%|
|Hand operated rubber roller||Reduced from 18% to 12%|
|Zip and slide fasteners||Reduced from 18% to 12%|
|Ethanol for sale to Oil Marketing Companies (OMCs) for blending with fuel||Reduced from 18% to 5%|
|Solid bio fuel pellets||Reduced from 18% to 5%|
|Footwear with a retail price of up to Rs. 1000 per pair||GST at the rate of 5%|
|Footwear with a retail price exceeding Rs. 1000 per pair||Same GST rate of 18%|
|Handbags including pouches, purses and jewelry box||Reduced from 18% to 12%|
|Wooden frames for painting, photographs, mirrors etc||Reduced from 18% to 12%|
|Artware of cork (including articles of sholapith)||Reduced from 18% to 12%|
|Stone artware, store inlay work||Reduced from 18% to 12%|
|Ornamental framed mirrors||Reduced from 18% to 12%|
|Glass statues other than those of crystal||Reduced from 18% to 12%|
|Glass artware including pots, jars, votive, cask, cake cover, tulip bottle, vase||Reduced from 18% to 12%|
|Artware of iron||Reduced from 18% to 12%|
|Artware of brass, copper/copper alloys, electroplated with nickel or silver||Reduced from 18% to 12%|
|Aluminium artware||Reduced from 18% to 12%|
|Handcrafted lamps including panchloga lamp||Reduced from 18% to 12%|
|Worked vegetable or mineral carving, articles thereof, articles of wax, stearin, natural gum, natural resins or of modelling pastes (including articles of lac, shellac)||Reduced from 18% to 12%|
|Ganjifa card||Reduced from 18% to 12%|
|Handmade carpets and other handmade textile floor coverings including namda/gabba||Reduced from 12% to 5%|
|Handmade lace||Reduced from 12% to 5%|
|Hand woven Tapestries||Reduced from 12% to 5%|
|Handmade braids and ornamental trimming in the piece||Reduced from 12% to 5%|
|Toran||Reduced from 12% to 5%|
|Treated (modified) tamarind kernel powder and plain (unmodified) tamarind kernel powder||GST at the rate of 5%|
|Beet and cane sugar including refined beet and cane sugar covered under heading 1701||GST at the rate of 5%|
|Water supplied for public purposes (excluding the one supplied in sealed containers)||No GST|
|Marine engine covered under sub – heading 84081093||GST at the rate of 5%|
|Kota and similar stones excluding marble, granite and polished stones||GST at the rate of 5%|
|Ready to use, polished Kota stone and other similar stones||GST at the rate of 18%|
|Milk enriched with vitamins or minerals salt (fortified milk) classified under HS Code 0401 as milk||Exempt from GST|
II. Refund of Accumulated Credit in respect of Inverted Duty Structure to Fabric Manufacturers
Fabrics call for GST at the rate of 5%. This is, however, charged on the condition that refund in respect of accumulated ITC as a result of inversion shall not be given.
Now, looking at the challenge faced by the fabric manufacturers as an outcome of this condition, the GST Council suggested to allow refund to fabric manufacturers in respect of inverted duty structure. This refund shall be made available prospectively, once the notification is issued.
III. Changes in respect of Valuation of Supply
- The council suggested to charge IGST at the rate of 5% on Pool Issue Price (PIP) that is imported on government account meant for direct use in agriculture. This is in place of IGST charged on the aggregate of assessable value and custom duty.
- It was also suggested to exempt compensation cess to coal rejects from washery. This is in cases of CESS paid coal on which ITC has not been claimed.
IV. Reduction in GST Rates of Services
|Type of Service||Changes in GST Rates|
|Supply of e-Books (this comes under education, training and skill development)||Reduced from 18% to 5%|
V. Exemptions in respect of Services
The Council recommended sector wise exemptions in respect of services. Following are the exemptions suggested in respect of services:
1. Farmers, Agriculture or Food Processing
It was suggested to exempt
- services rendered by the way of artificial insemination of livestock. This does not include horses.
- warehousing of minor forest produce. This is in harmony with the exemptions provided to the agricultural produce.
- services rendered by FSSAI to food business operators
- works of installation and commissioning taken up by DISCOMS or electricity distribution companies. This is undertaken for the purpose of extending electricity distribution network till the tubewell of the farmer or agriculturist for agricultural use.
2. Social Security, Pension Security or Senior Citizens
Under this sector, it was recommended to exempt:
- services rendered by Coal Mines Provident Fund Organization to the PF subscribers.
- provision of services by an old age home run by State or Central government or by a body registered under 12AA of Income Tax Act to its residents who are aged 60 years or more. Further, such a service is provided in return for a consideration upto Rs. 25,000 per month per member. However, the consideration must be inclusive of charges for boarding, lodging and maintenance.
- GST on the administrative fee collected by National Pension System Trust
- services rendered by an unincorporated body or a non-profit entity registered under any law for the time being. Provided such an entity is involved in activities
- concerning the welfare of industrial or agricultural labor or farmer or
- for the promotion of trade, commerce, industry, agriculture, art, science, literature, culture, sports, education, social welfare, charitable activities and protection of the environment
Also, such services are given to own members in return for a consideration in the form of membership fee. Provided such a membership fee is up to an amount of Rs. 1000 per member per year.
3. Banking, Finance and Insurance
The council suggested to exempt Reinsurance Services given to specified Insurance Schemes. These include schemes such as Pradhan Mantri Rashtriya Swasthya Suraksha Mission (PMRSSM) (Ayushman Bharat) that are funded by Government.
4. Government Services
The Council suggested to exempt:
- services rendered by Government to ERCC. These services are in terms of giving the right to collect royalty, DMFT from mining lease holders.
- guarantees provided by Central or State government or UT administrations to their PSUs or undertakings
5. Miscellaneous Exemptions
The Council decided to exempt:
- GST on import of services by Foreign Diplomatic Missions of the United Nations and other international organizations. This would be undertaken based on a reciprocal arrangement between the parties involved.
- services rendered by an entity of a person in India to any entity of the same person outside India. These entities are taken as establishments of two separate persons according to the explanation I in section 8 of the IGST Act. Provided the place of supply is located outside the taxable territory of India according to section 13 of IGST Act.
Further it was decided to:
- specify GST rate slabs on accommodation service on the basis of transaction value in place of declared tariff value. This would provide considerable relaxation to the hotel industry.
- laid down a GST rate of 12% with full ITC under forward charge for composite supply of multi modal transportation.
- rationalize the notification entry by stipulating reduced GST rate on composite supply of works contract that is received by the government/local authority in the course of their sovereign functions.
- rationalize entry with regards to composite supply of food and drinks in a restaurant, mess, canteen etc and also similar supplies to institutions including hospital, office, factory or educational institutions on contractual basis at GST rate of 5%. Further, the council also suggested to give clarity that the scope of outdoor catering under 7(v) is limited to supplies in case of outdoor/indoor functions that are event based and occasional in nature.
6. Clarifications in respect of Certain Services
It was recommended to clarify:
- that supply of services given by State and Central educational boards to students for conducting examination would be exempted from GST
- the applicability of service tax/GST on services provided by an Indian architect consultant with regards to an immovable property located outside India to Indian Diplomatic Missions/Posts abroad
- that courses offered by private ITIs for designated trades are exempt from GST. However, the non a- designated courses are subject to GST.
- to Auroville foundation that maintenance paid by it to Auroviliansis is not subject to GST
- to include an explanation in notification number 13/2017 – Central Tax (rate) in order to define the term ‘renting of immovable property’
- premium paid by government for executing PradhanMantri Rashtriya Swasthya Suraksha Mission (PMRSSM) (Ayushman Bharat) is exempt from GST
that some services like ‘deposit works (that is expenses for providing electric line or plant) associated with distribution of electricity supplied by DISCOM are subject to GST
7. Export or Other Trade Facilitation Measures
- In order to give relaxation to the exporter of goods, it was suggested to extend the exemption provided on outward transportation of all goods by air and sea. This was suggested to be extended by one year up to September 30, 2019.
- Buying banks or NBFCs should be made liable to pay GST on services rendered by individual DSAs to these banks or NBFCs under reverse charge. But, services given by non – individual NBFCs to these banks or NBFCs shall continue under forward charge for now.
8. Amendments in CGST, IGST, UTGST and GST (Compensation to States) Act
The Council made the following suggestions with regards to amendments in the CGST, UTGST, IGST and GST (Compensation to States) Act:
- raise the upper limit of turnover to go for Composition Scheme from Rs. 1 crore to Rs. 1.5 crore
- permit composition dealers to supply services apart from restaurant services for upto a value not more than 10% of turnover in the previous year or Rs. 5 lakhs, whichever is higher
- GST levied on reverse charge basis on supplies received from unregistered suppliers to be applicable only on specific goods in case of some notified classes of registered persons
- increase the maximum exemption limit for GST registration in states such as Assam, Arunachal Pradesh, Meghalaya, Sikkim, Himachal Pradesh and Uttarakhand from Rs. 10 lakhs to Rs. 20 lakhs
- allow the taxpayers to go for multiple registrations within a state or UT for multiple places of business situated within the same state or UT
- required compulsory registration only for those e-commerce operators that are bound to collect tax at source
- registration would remain suspended for the temporary period for which cancellation of registration is under way. This would provide relaxation to the taxpayer from unnecessary tax compliance.
- consider following transactions as no supply that is not subject to tax under schedule III. These include supply of:
- goods from a place located in the non – taxable territory to another place located in non – taxable territory without such goods entering the Indian territories
- warehoused goods to any person before clearance for home consumption
- goods in respect of high sea sales
- broaden the scope of Input Tax Credit so as to make it available in respect of the following:
- majority of the activities mentioned in Schedule III
- motor vehicles meant for transportation of persons with seating seating capacity of more than 13 persons including the driver, vessels and aircraft
- motor vehicles used for transportation of money by or for a banking company or financial institution
- services in respect of general insurance, repairs and maintenance of motor vehicles, aircraft and vessels on which credit is available
- goods or services to be provided necessarily by an employer to its employees under any law
- where recipient is unable to pay the outstanding amount to the supplier within 180 days from the date of issue of invoice, the ITC so availed by the recipient against such supply would be reversed. However, there is no liability to pay interest in respect of the same.
- registered persons can issue consolidated debit notes or credit notes with regards to multiple invoices issued during a financial year
- put a limit on the amount of pre-deposit of Rs 25 crores for filing an appeal before the Appellate Authority and of Rs. 50 crores before the Appellate Tribunal
- give commissioner the power to extend the time limit for return of inputs and capital sent on job works up to a period of one year and two years respectively
- supply of services to be entitled as exports where RBI allows to do so. This is irrespective of the fact that the payment for such services is received in Indian Rupees.
- there are cases where job work of any treatment done on goods imported for the time being in India are then exported, without using them for any other purpose in India. In such circumstances, place of supply of such goods would be taken outside India.
- recovery can be made from distinct persons, even if present in different State or UTs
- rationalize the order of cross-utilisation of input tax credit